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What Are the Different Types of Economic Growth Indicators?

Ray Hawk
Ray Hawk

Economic growth indicators are a set of statistics used to gauge the production level of goods and services in a nation or geographic sector, and can vary considerably depending on the level of advancement of the society being studied. They often include gross domestic product (GDP) calculations, which are directly affected by inflation and interest rates that drive business investment and manufacturing production, as well as affect fluctuations in commodity and stock markets. In developing nations, economic growth indicators are also focused on changing quality-of-life issues, such as literacy, life expectancy, and infant mortality rates, and other measures for levels of poverty that directly affect employment statistics and national GDP.

One of the major areas for calculating economic performance in first world or advanced industrialized nations is that of business performance. This can be broken down into several significant sub-categories, including income projections, inventory levels, and new capital investment. Details on these economic growth indicators are often relatively easy to gather over an industrial or national scale for publicly-traded companies by analyzing earnings reports released quarterly and following business cycles. The data gathered from business indicators has a direct impact on performance in the stock markets as well, which amplifies the understanding of in what direction an economy is headed.

Business performance can be used to calculate a country's overall economic performance.
Business performance can be used to calculate a country's overall economic performance.

The direct counterpart to economic growth indicators provided by businesses is that of those provided by individuals. This includes levels of consumer consumption, investment in the housing market, and changes in traditional savings rates, as well as wage growth trends. Formal calculations of consumer sentiment, such as the Consumer Confidence Index (CCI), are used to gauge growth on a monthly basis. The CCI is run by a non-profit Conference Board with members in 60 nations that produces a series of reports on Leading Economic Indicators for the US, UK, European Union in general, and other nations, such as China, Mexico, and Australia. The reports contain economic growth indicators based on such values as levels of unemployment, average wages, and building permits for new housing construction, known as Housing Starts.

Economic summaries are also often broken down along educational, ethnic, and industrial sector lines to determine how uneven economic growth indicators may be within a society. While job growth may be positive in one major sector such as manufacturing, it can be negative in another such as finance, and the size of individual sectors of an economy can determine overall expansion or reduction in GDP. Factors such as varying high school graduation rates among ethnic groups like Black, Asian, Native American, and Caucasian students also has a direct impact on employment rates and economic growth regionally.

Such sociological factors provide a truer picture of economic growth indicators when combined on a large scale, but GDP figures are still considered the most important economic indicator for understanding the health of a national economy as of 2011. Where GDP can be misleading due to an unequal distribution of wealth in a society, it is broken down into other methods of calculation. Gross National Product (GNP) includes the value of all of goods and services produced by a nation in a discrete period of time as GDP does, but it also adds in the value of income from property and assets held in foreign nations. Both GDP and GNP can also be calculated on a per capita basis, taking into account the size of a population, which makes for a more accurate comparison of advanced nations with small populations versus those with large populations, such as a comparison between Sweden and the US. An additional way of adjusting these figures to make them a more accurate method for looking at economic growth indicators includes the use of Real GDP or GNP, which factors in price variations between similar products and services in different nations.

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    • Business performance can be used to calculate a country's overall economic performance.
      By: Kenishirotie
      Business performance can be used to calculate a country's overall economic performance.